Capital District - NY Estate & Elder Law

Make Sure the Right People Have Access to Your Digital Accounts

 

 

The world is changing rapidly, thanks to fast-moving advances in technology, including the creation of digital assets. That means your estate plan may well need an update, according to Financial Advisor in “Unlocking Clients’ Digital Lives.”

As it turns out, if no one can access your digital assets, including accounts, many could be lost, stolen by a hacker or deleted.

Forty-one states and the U.S. Virgin Islands have passed laws that allow a financial planner or other fiduciary to access digital assets upon the death of a client, and four other states plus the District of Columbia are considering similar legislation.

In Missouri, the Fiduciary Access to Digital Assets Act allows a fiduciary to be granted access to a person’s electronic records or digital assets in a will, trust, power of attorney or another document.

The way we live our personal lives and the way we conduct our personal business and financial matters have changed, so we must address digital assets in our estate planning to reflect these changes.

Challenges are created if those digital assets are not addressed in the estate plan. Striking a balance between privacy rights and the need to settle an estate, can become an expensive and time-consuming issue. One family had to bring a lawsuit to access the emails of their son, a Marine who was killed while serving our country.

If you manage your bill paying and investments online, someone will need to be able to control bill payments, especially if they are on an autopayment schedule.

Start by preparing a complete inventory of all digital assets, including a description of each one and how it is accessed with names, passwords and security questions. Find out what each online platform requires, if a fiduciary or executor needs to access those accounts. Each platform, like each financial institution, has their own forms and procedures.

This information should be stored in a secure place. Some people prefer a password-protected digital location.

An estate planning attorney can help you create or update your estate plan that fits your unique circumstances and may include your digital assets.

Reference: Financial Advisor (Aug. 21, 2018) “Unlocking Clients’ Digital Lives”

 

Can You Customize Your Own Homecare?

 

There are many seniors and retired Americans that are not aware of options that help them remain in their own homes if that is what they prefer, according to Next Avenue in “Does Self-Directed Long-Term Home Care Make Sense for You?  

When one woman sought long-term care for her 83-year-old father, she knew the options because she was a long-term care researcher for AARP’s Public Policy Institute. She’s been examining how older Americans can “self-direct” their own care, choosing from several options they can receive in their own homes.

Several states now provide innovative strategies to provide long-term care at home. They involve “person-centered” choices to Medicaid patients. Each state has these programs, although they vary in quality and scope.

One Texas woman had relied on home health care agencies.  However, found them inflexible and unreliable. She switched to her state’s self-directed program and found that by scheduling and paying her home-care providers as she wished, the services were provided to her liking.

A study by Matematica Policy Research found that people who were able to take charge of their care were more satisfied and experienced equally good or better outcomes. The idea of choosing your own mode of long-term care is an evolving trend. There are now more than one million people in more than 200 self-directed Medicaid and Veteran directed programs nationwide. Enrollment in these services has increased by more than 40% since 2011.

Self-directed programs are not for everyone, because they require the ability to manage the care and vet caregivers. Someone who is too ill or suffering from mental incapacity may not be able to handle this.

You’ll need to know what services are available locally before making a choice. For example, when is adult day care an option? How do you find a home care specialist who can do anything from basic homemaking to providing in-home nursing care?

The other drawback is that self-directed services are typically offered only through veterans and state Medicaid programs for low-income participants.

Most Americans who need long-term services must still pay for it themselves. You’ll need a family member with the tenacity and time, or you can hire a geriatric care manager who will be able to determine needs and set up a care management plan. That person can help select the right professionals and coordinate services.

Reference: Next Avenue (Aug. 13, 2018) “Does Self-Directed Long-Term Home Care Make Sense for You?”

 

 

Prepared for Retirement? Maybe, Maybe Not

 

You can put a lot of effort into saving for retirement and still have questions.  However, it is important to know that the success of your plan will often be your income to expense ratio, according to Investopedia’s article “Determining If You’re Prepared for Retirement.”  

Commonly asked questions are:

• Am I saving enough, or did I save enough?
• Can I retire, or did I make a mistake and retire too early?
• Were my investment decisions the right ones?
• How am I doing, compared to my peers?

The answers to these questions are important, but like so many things in life, there is no “one-size-fits-all” answer. Just because you’ve accumulated six, seven or even eight figure retirement savings, doesn’t mean you’ve “won” the retirement game. In this case, size doesn’t always matter.

One of the key factors to a successful retirement is your income to expense ratio. Can you generate enough income from all sources, without drawing down too much from your portfolio?

If you have a small to non-existent portfolio, but you have a good-sized pension, maybe you don’t need such a big portfolio. If you live very simply, it’s possible that Social Security benefits and modest withdrawals from your investments might take care of your needs.

Remember that just because you have a large portfolio, does not mean you don’t risk running out of money during retirement. If you spend lavishly on first-class vacations, drive luxury cars and live in a house that costs a fortune to run, you can easily get yourself into a tight spot.

Take a long hard look at all sources of income to determine how long your portfolio will last. You should include Social Security, pensions, retirement accounts and any other sources of income. It is important to figure out how much income you’ll need on annual and monthly basis. You’ll then have a better sense of whether you are prepared for retirement.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances, as well as point out options on planning for your retirement.

Resource: Investopedia (July 19, 2018) “Determining If You’re Prepared for Retirement”

 

 

Ready to Retire? Watch for Hidden Fees

 

 

 

You have saved for many, many years and are now ready for retirement. You need to accomplish  many tasks as you get ready to leave your job but one of the most important things to watch for as you go over your accounts is hidden fees, according to US News & World Report in a “10 Hidden Fees to Be Aware of in Retirement.”

Annuities. When you buy an annuity, the sales person receives a commission. There are also underwriting and management expenses. Annuities are generally understood to have higher fees than typical mutual funds, so be aware of the cost and the benefits before making a purchase.

Advisory Fees. In a non-fiduciary managed account, typically with a broker who is not a registered investment advisor or CFP, it may not be easy to discern the fees. Ask questions and make sure that you understand how much of your money is being invested and how money is being used on fees.

Inactivity Fees from Brokerage Accounts. Here’s money tossed away. Check the fine print on your online brokerage accounts to be sure you are not spending money because the account is not active.

RMD Penalties. Anyone over age 70 ½ is required to take a minimum distribution from their IRA and other retirement accounts. If you take the money by December 31st, you are fine.  However, if you forget, the penalty is steep:  it can be up to 50% of the required withdrawal amount. That is  an expensive mistake.

Mutual Fund Expense Ratios. These are fees charged to cover a fund’s annual expenses. If you don’t know what they are, find out what you are spending on an annual basis.

Home Costs. If your retirement includes aging in place, make plans to ensure that your home remains safe.  This can include changing out a tub for a walk-in shower, adding a downstairs bedroom or repairs.

Car Costs. If you’ve got two cars but only use one, you should consider becoming a one-car household.

Travel in Retirement. Make the most out of your travel budget and be more aware of additional costs in organized trips. If you’re savvier about spending, you’ll likely be able to take more trips.

Inflation. This basic economic occurrence has been historically low in recent years.  However, it does not go away. Make sure that you’re prepared, if and when it returns with a bang.

 In addition to going over your accounts, take some time and meet with your estate planning attorney.

Reference: US News & World Report (July 18, 2018) “10 Hidden Fees to Be Aware of in Retirement.”

 

Retiring? 61 Is NOT the Magic Number

 

For some reason, many American have come to believe the magic number for retirement is 61 and they are wrong, according to The Motley Fool’s article “Americans’ Ideal Retirement Age–and Why It’s Not Realistic.” The article is based on a survey from Bankrate that reveals adults across the board think that 61 is the ideal age to retire.

Unless you can live without Social Security during retirement, 61 is not your magic number. Most American retirees can’t live on Social Security alone and those benefits have a major impact on the ability of most retirees to keep up with their bills.  However, eligibility doesn’t start until age 62. The people in the survey either didn’t know they can’t collect Social Security until they turn 62 or they are assuming they can get by without it.

The average Social Security benefit check is just more than $1,400, which adds up to about $17,000 a year. If you are among those who have little or no money set aside for retirement, that’s a lifeline.

A large number of working Americans are way behind in their retirement savings. It’s estimated that around 42% have fewer than $10,000 set aside for the future. How will they retire at all, much less retire at age 61?

Even if you can manage to keep working until age 62, filing at that age has its own issues. Today’s workers need to wait until their Full Retirement Age, or FRA, in Social Security’s terms, to receive their full monthly benefit. The difference is large enough to make it worth the wait.

 Assume that your full retirement age is 67, but you retire at age 62. Instead of $1,400, your monthly benefit would be $980.

 However, what if you are among those who really want to retire at 61? You’ll need to have started with saving and investing for retirement at a relatively young age and have been willing to take a very aggressive position in your investments. If you started at age 26, with a goal of retiring at age 61, and you are employed by a company with an employee sponsored 401(k), you’d have had to contribute $1,500 a month for thirty-five years to amass enough money—if your investments were earning a steady 7%.

As you prepare for retirement, meet with an estate planning attorney for advice on asset distribution, as well as power of attorney and healthcare directives.

Reference: The Motley Fool (July 18, 2018) “Americans’ Ideal Retirement Age–and Why It’s Not Realistic”

 

Healthcare Costs Can Be Shocking in Retirement

 

 

The fear of huge medical bills causes worry to many a retiree.  However, there is hope of solving the situation.

Retirees generally fear that a medical expense shock will decimate their savings.  However, there are ways to make the shock less stressful, according to Reuters in “How to shockproof your retirement healthcare costs.”

Brightwork Partners discovered in a national survey that as many as four out of five boomers agreed that they are worried about this.  However, they are too confused by all the details to actively plan for medical costs during retirement.

Help is on the way from national retirement researchers and investment companies. While most retirement healthcare research focuses on the big picture, like Fidelity’s recent estimate that a couple is likely to spend $280,000 on healthcare costs in retirement, a new study from Mercer Health and Benefits and Vanguard Research got a lot more granular.

The goal of the study is to develop a model that can be used by people before they retire, so they can create a budget that includes this admittedly staggering number. This model will be able to help set necessary saving goals and plan on how to achieve the goal.

An average 65-year-old woman retiring and using Medicare in 2018 will need $5,200 to pay for medical expenses. That’s including Medicare, additional health insurance and out-of-pocket costs. By 85, the cost jumps to $10,100 annually, or, for a less healthy person, $14,000. As they age, people need more health care and researchers say we should consider “healthcare inflation” as starting at 6.6% annually, with a rate of 4.5% over time.

Before retiring, experts say people need to be honest with themselves about their health and the costs that will ensue. If they have chronic illnesses like diabetes, cancer, heart disease or arthritis, they need to expect to spend more than the average amount.

The biggest medical care shock to retirement savings is long-term nursing home care.  However, these researchers found that only one in seven will face those costs for two years or more.

Think about these issues in advance and prepare for the costs. 

Reference: Reuters (July 11, 2018) “How to shockproof your retirement healthcare costs”

 

 

 

Take a Fresh Look at Your Estate Plan

 

There are many reasons to revisit your estate plan that don’t include the new tax laws that doubled the individual estate gift and GST tax exemptions to about $11.2 million per person (and doubled it for married couples), according to Forbes in “7 Reasons to Revisit Your Estate Plan, Trump Tax Law Aside.”

A will serves as the primary vehicle to convey your intentions for your assets and explain your legacy. The provisions of the will can be used to designate how assets will be transferred, whether outright to beneficiaries, to existing trusts or into a new trust that is created under the provisions of the will. If you use the will to create a testamentary trust, the will is where you specify the age for distributions to the beneficiaries and other important details. The will is also how you convey your wishes to make a gift to specific institutions and who should receive family heirlooms.

The executor or personal representative of the estate is the person or institution in charge of managing your affairs, after you have passed. The executor gathers all the information about your estate, including assets and debts, filing taxes, and administrative tasks. That person is named in the will.

If you have minor children, or a child with a disability, you want to choose a guardian and a successor guardian. If you do not, the court will appoint someone to rear your child(ren), and that may not be the person you would have wanted. Your spouse is always the obvious choice, but there are instances where both parents die unexpectedly, with no plans in place for their children.

There are many different types of trusts used to accomplish different things. They can be used to control assets and their distribution, which is particularly important when minor children are in the family. Trusts should be used when there is an individual in the family with a disability, an addiction or other issues who cannot manage their finances on their own.

Tax planning is a major part of any will. For a long time, estate planning attorneys focused on how assets were titled so that the first of a married couple to pass would be able to fully use their estate tax credit.  However, the relatively new concept of “portability,” which allows any unused credit from the first spouse to pass to be used for the benefit of the second spouse, eliminates the need for any unused estate tax credit to go into a bypass trust.

Not only do you need a will but this year you should consider reviewing your will, if you have not done so.

Reference: Forbes (March 15, 2018) “7 Reasons to Revisit Your Estate Plan, Trump Tax Law Aside”

 

Social Security Is Not Going to Disappear

 

A recent government report is being used by opponents of Social Security and government spending, as ammunition to charge that if something is not done, then Social Security will go broke in 2022. The claim is not true, according to Forbes in "Fake News: Why Social Security Isn't Going Broke."

Social Security currently takes in more money every year than it pays out in benefits. That has created a surplus in the Social Security Trust Fund. What will happen in 2022 is that, due to demographic changes, Social Security will start paying out more than it takes in. However, since there is a surplus, current benefits will not have to change. The surplus can be spent down. It will not run out until 2034. When that happens, Social Security will not disappear. Instead benefits will be cut slightly, as the program will only be able to pay out as much money as it takes in.

Reference: Forbes (June 18, 2018) "Fake News: Why Social Security Isn't Going Broke."

 

Cost of Longer Life Span May Be Inheritances

 

In wealthy countries, the idea of leaving an inheritance is in jeopardy and may become a distant memory for middle class families, according to the Financial Times in "Opinion Today: The end of inheritance."

 

Receiving even a small inheritance from parents, allows families to build up some wealth. That wealth can, in turn, be left as inheritances for their children.

The article is about the situation in the U.K..  However, the issues in the U.S. are the same.

The overall population is aging. The elderly are living much longer than in previous years. This increases the cost of providing care for the elderly population. There are not enough younger people paying taxes to make up for the increasing costs.

When political leaders have proposed addressing the issue, they have been punished by voters, who do not want changes to the elder benefits they have been promised.

At some point, the issue does need to be addressed.

Reference: Financial Times (Dec. 23, 2017) "Opinion Today: The end of inheritance."

 

Entitlement Programs May Be Next Target

 

It appears that Republicans may be prepared to propose cuts to some of the most popular government programs, according to Financial Advisor in "GOP Laying Groundwork To Cut Future Social Security, Medicare, Welfare Outlays."

Republicans are talking about making cuts to programs for the elderly, such as Social Security and Medicare. It is likely that any proposed cuts would be delayed and not effect current retirees. However, they will still be controversial for Americans who plan to rely on the programs in the future.

Cutting Social Security and Medicare is considered to be like touching the third rail in American politics. These are not popular proposals. Going through with this plan, guarantees that we will not be getting a relief from politics in 2018.

Reference: Financial Advisor (Dec. 6, 2017) "GOP Laying Groundwork To Cut Future Social Security, Medicare, Welfare Outlays."